Brokerages lower target share price for Samsung Card over stake sale

Samsung Card Co.’s decision to sell a 17 percent stake in its unlisted affiliate Samsung Everland Inc. to KCC Corp. prompted local brokerages to lower their target share prices for the card firm Tuesday, expressing disappointment over the lower-than-expected final transaction value.

In a regulatory filing on Monday, Samsung Card said its board gave the green light to a plan to sell 425,000 shares in Samsung Everland, the de facto holding company of Samsung Group, to KCC, a local maker of construction materials for 1.82 million won per share in a deal valued at 773.9 billion won ($674.4 million).

The deal, which will lower Samsung Card’s stake in Everland to 8.64 percent from 25.64 percent, came as the company is required to reduce its holding by April under a local regulatory law.

Korea brokerages said the sales deal that set the price at 1.82 million won per share means a 15 percent discount against the share’s book value of 2.14 million won. The market estimate was between 2 million won and 3 million won, they claimed.

“The stake sale will bring in a profit of 731.4 billion won to Samsung Card, but at the same time will disappoint individual shareholders,” said Hyundi Securities.

Hyundai adjusted the value of Everland’s share value from 3 million won to 1.82 million, downgrading its investment opinion for Samsung Card from “buy” to “neutral.” The securities house also lowered the optimal share price for Samsung Card from 55,000 won to 43,000 won, citing the possibility that investment sentiment will deteriorate in connection with the lower-than-expected stake sale price.

Woori Investment & Securities also lowered the target share price for Samsung Card from 60,000 won per share to 53,000 won. “Samsung Card is expected to use the proceeds to repay its borrowings or go for a merger and acquisition deal next year,” Woori said.

Nomura Securities also said in a report on Tuesday that adjusting the target share price for Samsung Card as the stake sale would shave the company’s book value by 104 billion won.

Citigroup said the sale price was lower than its expectation, but the deal is “meaningful” in the long term.

“The sale price came short of our expectation, probably due to difficult market conditions and time restrictions,” it said in a report issued on Tuesday. “A positive is that Samsung Card is disposing of the non-core asset, which should trigger more active capital management and stronger core business growth in the long term,” Citigroup said, maintaing the “buy” recommendation.

As for the use of proceeds, Citigroup had the same view as Woori, projecting that Samsung would buy a consumer financing firm or pay down borrowings to lower funding costs.

Samsung Card said on Monday the stake will be sold by Jan. 31. and the company will offload an additional 3.64 percent interest in Samsung Everland by April.

The high-profile stake sale involving Everland will affect Samsung Group’s complicated governance structure that involves its other units such as Samsung Electronics Co. and Samsung Life Insurance Co.

By Yang Sung-jin (insight@heraldcorp.com)